340B Program Updates
by Elizabeth “Issie” Karan

On May 17, 2021, Health Resources and Services Administration (HRSA) Acting Administrator Diana Espinosa sent letters to six pharmaceutical manufacturers (AstraZeneca, Lilly USA, Novartis, Novo Nordisk, Sanofi, and United Therapeutics). The letters may be found here (look for “HRSA Correspondence to Stakeholders 2021).

The letters state unequivocally that these manufacturers are in direct violation of the 340B statute because of policies restricting 340B Program pricing to covered entities that dispense medications through pharmacies under contract. As you may remember, beginning in July 2020, these manufacturers implemented policies which limited covered entities’ utilization of 340B drugs at contract pharmacies. The manufacturers took different approaches, with some entirely refusing to provide the 340B price on all products sold to covered entities and dispensed through contract pharmacies, while others limited sales by requiring specific data submissions or selling drug products only after a covered entity has demonstrated 340B compliance. The Hemophilia Alliance was able to get an exception to these policies for products used by HTCs.

Now, for the first time, HRSA has publicly stated that these policies have resulted in overcharges to covered entities. HRSA expects changes, stating that “[The drug manufacturer] must immediately begin offering its covered outpatient drugs at the 340B ceiling price to covered entities through their contract pharmacy arrangements…” “[The drug manufacturer] must comply with its 340B statutory obligations and the 340B Program’s CMP final rule and credit or refund all covered entities for overcharges that have resulted from [this] policy. . . . Continued failure to provide the 340B price to covered entities utilizing contract pharmacies, and the resultant charges to covered entities of more than the 340B ceiling price, may result in CMPs as described in the CMP final rule.”

This last sentence is important as HRSA is putting manufacturers on notice that, if they were to ignore their requests, they could be subject to significant fines. As a reminder, the 340B Program Ceiling Price and Civil Monetary Penalties final rule states that any manufacturer participating in the 340B Program that knowingly and intentionally charges a covered entity more than the ceiling price for a covered outpatient drug may be subject to a Civil Monetary Penalty (CMP) not to exceed $5,000 for each instance of overcharging. These assessed CMPs would be in addition to repayment for an instance of overcharging.

These manufacturers likely will make changes to their existing approaches to contract pharmacies in 340B to limit their financial exposure. However, this is not likely to be the end to challenges to the use of contract pharmacies in 340B. We will keep monitoring the situation and update accordingly.